Q&A | September 26, 2013

Cloud Computing Study Indicates Challenge Is To Keep Up With Demand

According to CompTIA’s4th Annual Trends in Cloud Computing study, the cloud market is maturing with revenue and profits growing. Along with this good news, however, there is also some evidence that the cloud market is experiencing growing pains.

Carolyn April, director of industry analysis at CompTIA, reports, in some cases, “Demand has outstripped capacity and some people have lost customers.”

The study, based on an online survey of 501 end users in the U.S. and 400 IT channel companies, found 40 percent of channel firms have experienced cases where demand has exceeded their capacity to deliver. An additional 20 percent have lost deals because a customer wanted a cloud solution they didn’t offer.

According to April, options for solutions providers include specializing — limiting what they offer — or “realizing there will be a time when you can’t keep up with the demand.”

The high demand for cloud services also means increasing opportunities. April says, “We’re seeing the highest growth potential in the management and monitoring of these solutions going forward.”

The section of the study, Channel Relationships: Vendors, Customers, and Distributors, also reports 60 percent of solutions providers say offering cloud services has strengthened their customer relationships. “Cloud really affords an opportunity to cement that trusted-advisor status,” says April. She says cloud requires more than just making a sale — it’s having a business conversation, understanding the customer’s pain points, and helping them find a solution.

“It’s knowing what the customer needs — and in some cases that might not be cloud,” April points out.

She says concern over security is often the reason customers initially reject cloud, but “then the solutions provider has an opportunity to step up and explain security.”

The study, divided into six sections, also looks at End User Cloud Migration Issues. Researchers found that as companies are becoming more familiar with the cloud model, more often they are optimizing their usage by moving from one public cloud to another or moving to their own private cloud. April comments, “The amount of migration has gone up successively with each of the studies. In 2010, there was a lot of apprehension and little adoption. This year there is more maturity of cloud business among the channel. Overall, it’s a real uptick and a validation that cloud is here to stay.” The study says cloud migration will become a greater focus area as time goes on, with 44 percent of companies that have not yet performed a secondary migration planning to do so in the next 12 months.

The section on Channel Business Model Analysis found that half of channel firms today consider their cloud business as “mature.” Another 40 percent say their cloud services have reached a degree of maturing alongside their more established lines of business. April says this finding is significant. “This was a fundamental fear point for a lot of solutions providers.” This section of the study also gives the details of the four primary cloud business models for the channel: Build, Provide/Provision, Enable/Integrate, and Manage/Support.

The last section of the study, Cloud Challenges and Opportunities lists some hurdles to overcome as the market matures. The first is “the incidence of rogue IT.” Some businesses are procuring their own cloud solutions. April says this, too, is an opportunity. “In order to move to the next level, it’s well beyond their capabilities. It opens up a lot of profit margin opportunities.”

Another challenge is transitioning, either launching cloud services or trying to grow existing ones. The study states a critical question is whether cloud makes sense from an ROI perspective, and although the answer is complicated due to the wide variety of business models and revenue structures, solutions providers are moving toward cloud. About 60 percent of those surveyed are proactively pursuing several segments of the business models to enter the cloud market, with medium to larger firms more likely to do so.

To make the transition, the companies surveyed use several strategies. Of those companies, 46 percent invested in technical, sales, and business training, 42 percent transitioned just a part of their business with plans to scale later, 40 percent pursued vendor-based training, 39 percent partnered with other solutions providers, 38 percent hired new sales reps with cloud experience, and 32 percent pursued new lines of capital or credit.